Japan Proposes Major Concessions on Trade Issues

Japan offered some significant concessions Monday to meet U.S. demands that it open its markets to more foreign imports--apparently enough to satisfy Bush Administration policy makers at this stage of the negotiations, U.S. and Japanese officials said.

Although both sides refused to disclose publicly what the Japanese had proposed, U.S. and Japanese sources said the measures include:

* Stepped-up enforcement of antitrust laws--including tougher penalties for violators--to discourage bid-rigging and collusive practices by corporations. U.S. officials say those practices have prevented foreigners from competing against domestic Japanese firms.

* Increased spending for public works--targeted to specific sectors of the Japanese economy--to stimulate domestic demand so as to spur more import-buying and reduce Japan’s pool of surplus savings.

* Relaxation of current restrictions on the establishment of large retail stores. U.S. officials say the move is the key to breaking the stranglehold that domestic manufacturers now have in keeping out foreign-made consumer goods.

The proposals were outlined personally Monday morning by two special envoys sent by Japanese Prime Minister Toshiki Kaifu. Kaifu also telephoned President Bush early Monday to express his “personal commitment” to solving trade problems. The call lasted 15 minutes.

In Atlanta on a political trip, Bush told reporters that he had had “a very fruitful conversation” with Kaifu and was “encouraged by recent progress.” But he added that he would “wait and see” until the proposals are analyzed.

After an initial day of review, U.S. negotiators termed the Japanese proposals “significant.” Although Washington probably will demand some additions over the next few days, the package shows that Japan “has made considerable effort,” a senior negotiator said.

The talks are part of a new round of sub-Cabinet-level negotiations between the two countries--known formally as the Structural Impediments Initiative negotiations--designed to alter some of their fundamental economic policies and business practices to help pare the $49-billion trade imbalance.

The negotiations, unprecedented in their scope, have been under way since last summer. Officials on both sides plan to issue an “interim report” Wednesday. The final version--along with formal proposals on how to carry out their promises--is due in mid-July.

Officials said Monday that Tokyo and Washington have also resolved two of three narrower trade disputes--on satellites and supercomputers--that the United States cited last year as unfair trade practices. A third, involving forest products, is still being discussed.

This week’s talks, to continue today and Wednesday, climax a month of frenetic activity on both sides following a summit meeting between Bush and Kaifu in Palm Springs on March 2 and 3.

At that session, Bush essentially warned that political resentment toward Japan was rising in the United States as a result of continuing trade frictions and that, unless Tokyo acted to ease the situation, the White House might not be able to contain those pressures.

Just 10 days later, Bush and Secretary of State James A. Baker III were even more blunt during conversations with former Japanese Prime Minister Noboru Takeshita, who is considered a major force within Japan’s ruling Liberal Democratic Party.

To underscore Japan’s commitment to the current talks, Kaifu sent a 64-member delegation to the SII talks this week, including his two personal envoys, Nobuo Matsunaga, a former Japanese ambassador to the United States, and Hisashi Owada, the deputy foreign minister.

The two met with Baker and National Security Adviser Brent Scowcroft late Monday morning. Later, lower-level representatives from both countries were closeted at the State Department reviewing the new Japanese plan.

The two Japanese emissaries are scheduled to meet with Bush on Wednesday after the current round of negotiations has ended. Current plans call for both sides to issue a two-part “interim report” detailing what each side plans to do to help reduce the trade imbalance.

Kaifu was quoted as having told Bush that “since returning (from Washington last month), I have been making all efforts to resolve Japan-U.S. trade issues.”

Meanwhile, Japan suffered another big financial setback Monday as prices on the Tokyo stock exchange plunged 6.6%--the second-largest drop in its history--while the yen hit a three-year low of 160.35 to the dollar before strengthening to 159.95.

Analysts say the plunge in both indicators reflects excessive speculation in the markets earlier this year and worries by investors that the Japanese central bank is not doing enough to stem the recent rise in the nation’s inflation rate.

There is some worry that the slide could get out of hand unless the Bank of Japan moves soon to raise interest rates.

Japan had been looking to Washington to help reduce interest rates here instead, but the Federal Reserve Board has refused to take part in such a move.

There was no firm indication as to what, if anything, new the Bush Administration might propose to meet the series of suggestions that Japan has made on policies that the United States could adopt to help reduce the trade imbalance.

Initial signs were that the Administration would argue that Washington has already proposed the measures that it intends to take--a continued effort to reduce the federal budget deficit, a new “family” savings account to spur more saving and a bid to improve education here.

Besides the extra public works spending and anti-trust measures, the United States has also asked that Japan end special tax breaks that help bid up land prices. In addition, it has urged Japan to overhaul its pricing system, which keeps domestic prices high, and to end interlocking relationships in businesses.

Tokyo wants Washington to boost spending on research and development, to reform methods of corporate financing, to get U.S. firms thinking on a longer-term horizon and to step up export-promotion activities.

The Japanese made no secret Monday that they were hoping to compromise rather than face the possibility of retaliation if the talks fall apart. Taizo Watanabe, the Foreign Ministry’s chief spokesman, told reporters at a briefing that “we have done our best.”